Why Falling Energy Costs and Tech Spending Will Lift the Global Economy

2026-11-14 economy

New York, Saturday, 14 November 2026.
Global growth will reach 2.8 percent in 2027 as artificial intelligence investment hits an unprecedented $1.8 trillion, offsetting tighter financial conditions and cooling crude prices.

Goldman Sachs’ Optimistic 2027 Growth Forecast

Goldman Sachs Research has projected a 2.8% expansion for the global economy in 2027, marking a modest acceleration from 2.7% in 2026 [1][4]. This forecast hinges on two pivotal factors: the continued decline in energy costs and the unprecedented surge in artificial intelligence (AI) infrastructure investments, which are expected to reach $1.8 trillion in nominal terms [1][4]. The investment bank’s outlook, released on November 13, 2026, underscores a pivotal shift from 2026’s energy-driven inflationary pressures to a more balanced growth environment in 2027. Jan Hatzius, Chief Economist at Goldman Sachs Research, noted that ‘lower energy prices should outweigh the effect of tighter financial conditions and a smaller fiscal impulse to GDP expansion in 2027’ [1].

AI Investment as the Engine of Growth

The projected $1.8 trillion in global AI capital expenditure for 2027 represents a 63.636% surge from $1.1 trillion in 2026, with over $500 billion earmarked for U.S. hardware alone [1][4]. This influx of capital is anticipated to contribute approximately 0.4 percentage points to global GDP growth, while boosting U.S. ‘true’ GDP by 0.6 percentage points [1]. The economic impact of AI investment is expected to extend beyond immediate GDP gains, fostering productivity enhancements across advanced and emerging markets. However, Goldman Sachs cautions that the labor market effects of AI adoption will remain modest in 2027, with more significant disruptions anticipated in 2028–2029 [1].

Energy Prices: From Drag to Tailwind

A key driver of Goldman Sachs’ optimistic 2027 outlook is the anticipated decline in energy prices. Brent crude oil, which ended 2026 at around $100 per barrel, is projected to fall to $78 per barrel by the end of 2027 [2][4]. This 22% reduction in oil prices is expected to ease inflationary pressures, particularly in the U.S., where core PCE inflation is forecast to decelerate from 3.2% at the end of 2026 to 2.4% by the end of 2027 [2][4][6]. The moderation in energy costs will not only reduce input expenses for businesses but also alleviate margin pressures in energy-intensive sectors. Goldman Sachs’ commodities team further highlights that declining oil prices, combined with fading tariff effects and easing AI-related supply chain pressures, should help central banks bring inflation closer to target levels [2][4].

Regional Growth Dynamics: Winners and Laggards

Goldman Sachs’ 2027 growth forecasts vary significantly by region, reflecting divergent economic conditions and policy responses. China is projected to grow at 4.5%, outperforming the consensus of 4.4%, driven by robust export demand and a widening trade surplus [1][4]. Meanwhile, Japan’s GDP growth is expected to receive a substantial boost of 0.7 percentage points, fueled by consumption tax cuts, increased defense spending, and government investment plans [1]. The U.S. is forecast to expand by 2.4%, supported by a reversal of some spending cuts from the 2025 One Big Beautiful Bill Act following the Democratic victory in the November 2026 election [1][4]. In contrast, the Euro Area’s growth is projected at a more subdued 0.9%, constrained by structural challenges and delayed energy cost pass-through to consumers [1][3]. Europe’s earnings outlook, however, remains robust, with Goldman Sachs forecasting an 18% increase in 2026 and 7% in 2027 for European stocks, driven by global revenue exposure and currency effects [3].

Monetary Policy: A Mixed Bag of Hikes and Cuts

Monetary policy trajectories in 2027 are expected to diverge across major economies, reflecting varying inflation and growth dynamics. In the U.S., Goldman Sachs projects the Federal Reserve will implement two rate hikes in December 2026 and March 2027, followed by a shift to rate cuts in December 2027, targeting a terminal rate of 3.25% to 3.5% [4][6]. The European Central Bank (ECB) and Bank of England are also expected to conclude their tightening cycles by the end of 2026, with normalization cuts beginning in late 2027 [4][6]. The Bank of Japan, however, stands out as an outlier, with Goldman Sachs forecasting a 25-basis-point hike in December 2026 and additional increases in March and June 2027 to reach a terminal rate of 2.0% [1][4]. This divergence underscores the Bank of Japan’s aggressive stance to combat persistent inflationary pressures and support the yen [alert! ‘Bank of Japan’s terminal rate projection is subject to geopolitical and domestic economic developments’].

Market Implications: Stocks Poised for Rally Despite Earnings Slowdown

Despite an anticipated slowdown in earnings growth, Goldman Sachs remains bullish on equities for 2027. The S&P 500 is forecast to rise 14% to 8,700, driven by attractive valuations following a recent technology stock sell-off and moderating inflation [2][5][7][9]. Earnings growth for the S&P 500 is projected to decelerate sharply from 36% in 2026 to 11% in 2027, reflecting the peak of AI-related capital expenditure and fading post-pandemic productivity gains [2][5][7]. However, Goldman Sachs strategists, including Peter Oppenheimer, argue that lower bond yields, reduced inflation, and attractive equity valuations will sustain the bull market, albeit with heightened volatility [2][7]. The firm recommends overweighting U.S. and Japanese equities while adopting a cautious stance on Europe, where earnings growth is expected to lag behind economic expansion [2][4]. In fixed income, Goldman Sachs expects the U.S. 10-year Treasury yield to fall to 4.6% by the end of 2027, providing further support for risk assets [4].

Risks on the Horizon: Geopolitics and Policy Missteps

While Goldman Sachs’ 2027 outlook is broadly optimistic, the investment bank has identified three major downside risks that could derail the forecast. First, an escalation in the Iran situation could push oil prices to $132 per barrel, reigniting inflationary pressures and undermining global growth [4][6]. Second, turbulence in developed-market bond markets, triggered by unexpected inflation surprises or fiscal imbalances, could disrupt financial stability [4][6]. Third, an early peak in the AI investment cycle could undermine productivity gains and weigh on corporate earnings [4][6]. Goldman Sachs’ Chief Economist, Jan Hatzius, described the outlook as ‘solid but unspectacular,’ emphasizing the need for vigilance amid these risks [4][6].

Sources

Goldman Sachs global GDP